All posts tagged GSEs

Mortgage rates could rise by as much as 1.5 percentage points for homeowners with weaker credit or smaller down payments under various legislative proposals to overhaul Fannie Mae and Freddie Mac, according to a study prepared for an industry group.

The study, by Kent Colton and Michael Carliner of the Harvard Joint Center for Housing Studies, was produced for the Leading Builders of America, a trade group representing large U.S. home builders. The study found that earlier estimates of mortgage-rate increases from an overhaul of the mortgage-finance giants understate the potential impact to average American borrowers. Read More »

The problem with overhauling mortgage-finance giants Fannie Mae and Freddie Mac boils down to this: many in Washington say they want to get rid of the companies, but they want to preserve many of the benefits that those companies enabled — namely, providing a steady source of relatively cheap 30-year, fixed-rate mortgages.

This explains not only why it has taken nearly six years for the overhaul debate to heat up but also why it could take several more before Washington figures out how to remake the nation’s $10 trillion mortgage market. Read More »

A top economic adviser said Wednesday that Fannie Mae and Freddie Mac aren’t for sale in a bid to squash hopes that the Obama administration would allow the firms to be recapitalized.

Gene Sperling, the director of the White House’s National Economic Council, said the administration would not support plans to recapitalize Fannie Mae and Freddie Mac in their current or modified forms because of the difficulty to solve core concerns over having two large entities dominate the nation’s $10 trillion mortgage market.

Mr. Sperling’s remarks follow major moves last week by hedge funds and large investors to up the ante in their campaign to have the U.S. government restore value to the shares of Fannie and Freddie, the mortgage-finance giants that the government bailed out in 2008. Here’s what he had to say about housing policy: Read More »

The government should provide an explicit federal guarantee of certain mortgage-backed securities in order to ensure mortgages are available “at reasonable rates in good and bad economic times,” a top White House economist said in a speech Wednesday that sketched out in greater detail the Obama administration’s aims of any replacement of Fannie Mae and Freddie Mac.

Private investors should stand at the center of a revamped housing-finance market because private sector competition can provide better prices and services for consumers, said James Stock, a member of the White House Council of Economic Advisers.

“But financial markets are not perfect,” he said. “And the government has a role in reducing the impact of financial-market failures on real economic activity, especially when those failures are exacerbated by a cyclical downturn.”

Mr. Stock, an economics professor at Harvard University, said any overhaul must include features that make the market “cyclically resilient,” or able to withstand market downturns without the kind of collapse that forced the government to take over Fannie and Freddie in 2008. The speech didn’t specify what kind of institutions should take the place of Fannie and Freddie, or how those institutions should be structured. Read More »

If the White House nominates economist Mark Zandi as the director of the regulator that controls Fannie Mae and Freddie Mac, there shouldn’t be too many surprises about what Zandi thinks about housing finance.

That’s because Zandi has been one of the most frequently quoted economists since the housing boom turned to bust. He’s a regular presence on cable television news shows, the industry panel circuit, and Capitol Hill testifying before lawmakers.

Zandi, who The Wall Street Journal reported on Friday is under consideration to run the Federal Housing Finance Agency, has been an early and outspoken advocate for more aggressive action to stem the foreclosure crisis, championing efforts to boost refinancing and to force banks to write down mortgage principal. He also endorsed a bankruptcy overhaul known as “cram-down,” in which judges would be allowed to write down mortgage debt.

Zandi has argued for the government to replace Fannie and Freddie with a public-private hybrid system whereby the U.S. would provide catastrophic risk insurance for certain loans, but he’s also advocated for the government to revisit how much it invests in housing. Here’s a look at some of Zandi’s public positions on housing over the past few years. Read More »

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